It has seemingly become a maxim of healthcare legislation in Washington that just because there is widespread, bipartisan support for an idea does not mean that it will soon become law. The repeal of the so-called “Cadillac tax” under the Affordable Care Act (ACA) is a perfect example of this.
As a reminder, the Cadillac tax is the section of the ACA that would impose a 40% excise tax on the value of employer-provided health plans over a certain dollar limit ($11,200 per year for individuals and $30,150 for family coverage, adjusted for inflation.) Meant to drive down the utilization of the most generous “gold-plated” or “Cadillac” health insurance plans, the tax would impact a much wider swath of the employer-provided health insurance market. A recent analysis by the Kaiser Family Foundation, projected that the Cadillac tax would affect a growing share of employers over time, reaching 37-46% of employers by 2030.
The tax was supposed to take effect in 2018, but Congress has delayed implementation twice. It is currently set to go into effect in 2022.
In July of 2019 the U.S. House of Representatives voted to repeal the tax, with a vote of 419-6, but the bill has not gone anywhere since. There is a Senate version of the bill that has 62 co-sponsors.As there are only 100 Senators in total, finding 62 of them willing to affix their name to a piece of legislation is an impressive indication of support. And yet, both the House bill and the Senate bill have sat in the Senate, unmoving since July.
The reasons for this stall are numerous, and almost all political. First, there is little urgency for members of Congress on this issue because there are two years remaining before the tax will be imposed. Moreover, there will be a cost to repeal. The Congressional Budget Office has estimated that repealing the tax would cause a $197 billion increase in the federal deficit by 2029. This leaves proponents of repeal looking for “pay-fors,” or other sources of revenue (either cuts in spending or increases in taxation) to make up for the revenue that will be lost by repeal, so that the bill can be seen as “revenue-neutral.” Finally, even an idea as seemingly popular as Cadillac tax repeal cannot escape the larger political context of Washington, D.C. With a presidential race underway and at an enormously contentious time in the capitol, there seems to be no room for passage of any legislation other than the most immediately necessary bills to keep the lights on and the government running.
But employers should not despair. Cadillac tax repeal (or at least another delay) is overwhelmingly likely to be passed before 2022. How and when that happens, however, remains to be seen.
About Amy Donovan
Amy is Keenan's Vice President of Legislative and Regulatory Affairs, authoring the firm's Briefings and position papers on legislation, regulation and litigation that have an impact on the firm and its clients.